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GFG Alliance Announces Major Restructuring for Refinancing
GFG Alliance Announces Major Restructuring for Refinancing

GFG Alliance (GFG) and Liberty Steel Group’s Restructuring and Transformation Committee (RTC) has provided an update on the restructuring of GFG’s steel businesses. The developments help pave the way for a refinancing which will enable GFG to pay back creditors following the collapse of its main lender Greensill Capital. This in turn will allow GFG to refocus its business, protect jobs and develop further its remaining assets.

The RTC was established on 5th May 2021 to restructure Liberty’s operations to focus on core profitable units, and with a brief either to fix or to look at the option of selling underperforming units.

Since May, the RTC has evolved a strategy for Liberty’s future which will see the company focus on its primary metal production hubs and associated downstream units, and renewable energy developments, to support its Greensteel vision. The restructuring will support GFG’s progress on refinancing of the group, which has been boosted by the strength of core assets and record steel, aluminium and iron ore prices.

In its reformed state, Liberty will be focused on core business units, including InfraBuild and Liberty Primary Metals Australia (LPMA) in Australia and the Liberty Ostrava and Liberty Galati steelworks in Europe. These will continue to be operationally and commercially developed to improve their generation of cash and profits. The plan also incorporates a restructured and refocussed UK business as well as more closely integrating the European downstream steel plants into Liberty’s major businesses.

As part of that process, GFG and the RTC have already achieved the following:

GFG Alliance and Credit Suisse Asset Management (CSAM) have agreed a formal standstill agreement with regard to LPMA which will enable the business to complete full refinancing;
progressing the refinancing of LPMA, with White Oak Global Advisers LLC (White Oak). The refinancing will be sufficient to pay out LPMA’s Greensill debt in full;
agreement on a framework with Greensill Bank’s administrators (GB) for positive direct engagement to achieve an amicable resolution; submission of refinancing memoranda to interested parties for Liberty Steel Continental Europe, including major primary production hubs in Ostrava and Galati; development of new business plans, asset strategy and management structure for Liberty Steel UK.

United Kingdom

Liberty Steel UK is continuing to assess a sales process for its UK aerospace and special alloys steel business in Stocksbridge, which while being a unique, high quality business servicing marquee customers, is not core to Liberty’s future. This sale will allow Liberty to focus on developing its Rotherham plant, including its low carbon emitting electric arc furnaces, into a competitive two million tonnes Greensteel plant, one of the largest in Europe.

On 2nd July the current Managing Director of LSUK, Jon Ferriman, will be stepping down. The organisation would like to thank Jon for his role in managing the business through Covid-19 and its response to the collapse of Greensill. Joining LSUK as Chief Executive Officer (CEO) is Roy Chowdhury who brings with him thirty years of industry and turnaround experience. Roy is joined by Anton Krull as LSUK’s new Chief Financial Officer (CFO), who brings with him twenty years of corporate finance and restructuring experience.

The RTC has also been exploring strategic options regarding the future of the UK Engineering business. The process, which is being supported by Alvarez & Marsal, is focused on identifying new owners which would provide a sustainable future for the business serving automotive OEMs. GFG Alliance and the business’s key customers will continue to work together to provide adequate cash flow to keep the business solvent until the sale process is completed.

Europe

In Europe, the RTC is developing plans to merge its European downstream businesses, Liberty Liège-Dudelange (Belgium and Luxembourg) and Liberty Magona (Italy), into the Liberty Galati organisation to optimise operational integration between the three plants. Under the restructuring Liberty Galati, the largest integrated steelworks in Romania, will become the primary supplier of Hot Rolled Coil (HRC) to Liberty’s downstream businesses, ensuring a secure and sustainable supply of their raw material. The closer links to the downstream businesses will allow Liberty Galati to offer a significantly broader range of high quality products to its existing customer base across Central and South Eastern Europe. As part of the restructuring Renaud Moretti, CEO for Liberty Steel Downstream in Europe, will now report into Paramjit Kahlon, Liberty’s CEO of Primary Steel and Integrated Mining.

The initial stages of that restructuring programme have already started, with the first supplies of HRC from Liberty Galati expected to arrive at the downstream plants within the next few weeks, allowing them to restart their lines soon afterwards. The restructuring is expected to lead to synergies across a range of functional areas, including procurement, IT and accounting. The company will continue in its constructive dialogue with unions and works councils on these changes.

Australia

The RTC continues to explore potential strategic partnership or sale options for the Cultana Solar Farm and Playford Battery projects in South Australia. The options under consideration will include SIMEC retaining an interest and with GFG retaining priority access to this energy for its Whyalla development plans. This will expedite ways to power the Whyalla operations with low cost renewable energy, which is key to GFG’s future ambitions to scale up production and introduce hydrogen steel making.

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